Using Microfinance for Safe, Durable, & Affordable Housing

Commitment by

LafargeHolcim

In 2014, Lafarge committed to use microfinance to provide safe, durable, and affordable housing for the world's rapidly increasing urban population. Along with partners, Lafarge will identify beneficiaries and supply the design, project management, and finance expertise to give families access to a safe, comfortable, durable, and energy efficient house through micro-credits. Lafarge will partner with microfinance institutions to provide microloans for home improvement and construction. Borrowers will be provided access to a team of technical assistants, implemented by Lafarge, which will enable them to optimize the design and phasing of their construction project. Within a year, Lafarge hopes to complete 10,000 projects.

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Learn how LafargeHolcim is offering affordable housing solutions through microfinance.

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Commitment by

LafargeHolcim

Details

APPROACH:
The goal of the Lafarge commitment is to develop/expand the use of microfinancing to facilitate the construction of safe, durable & affordable housing in 10 developing countries. By the end of the commitment period in 2015, the goal is to reach a run rate of 10,000 projects per year, which cumulatively will have positively affected the lives of 80,000 people.
The Lafarge 'Affordable Housing Program,' is intended to implement a range of initiatives to provide decent affordable housing and financing for home extensions and renovations. To achieve this goal, the various partners in each project must each fulfill their role in identifying the right family, supplying the design and project management expertise necessary for implementation, and lastly, providing the microfinancing available to allow it to happen. This type of program can only be successful if there is a deep understanding of the cultural and societal issues that can be barriers or accelerators for this type of progress, requiring on the ground expertise in each area where the program is implemented. The aim of this program is to give families access, maybe for the first time, to a safe, comfortable, durable, and energy-efficient house through micro-credits.
Lafarge will partner with microfinance institutions, which provide microloans for home improvement and construction. Borrowers are provided access to a team of technical assistants, implemented by Lafarge, which enable borrowers to optimize the design and phasing of their construction project. In addition, Lafarge leverages its network of building materials retailers where these loans are spent. Lafarge also seeks to partner with foundations and NGOs to conduct surveys in slum areas to identify the construction habits and pain points of their inhabitants, so these principles of affordable housing can be extended to these areas.
Families are selected by the microfinance institutions based on their knowledge of the customers' capacity to repay the loans. Once they are selected, a Lafarge technical assistance team visits the loan applicants, prepares the drawings and bills of quantities, and provides advice on how to build safely. Once the loan is approved by the bank, money is transferred to the materials retailers selected by Lafarge for the quality of the products and professionalism. Borrowers then receive support from Lafarge team during the construction process with frequent visits on-site. Lafarge technical assistance is provided free of charge to the borrowers and has shown to have a huge impact on the quality of construction.
ACTION PLAN:
2014
July 9, 10: Conduct a microfinance academy in Nairobi to train potential microfinance organizations
August: launch of the new earth and cement block in Tanzania
October 10: HBR article conference in Paris (an HBR article is currently being written)
October: kick off project in Cameroon
November: kick off project in Kenya
2015
April: results of 2014 work reported in Lafarge Sustainability report

Background

The global population is expected to increase by about 50 million annually through 2050. Most of this growth will occur in urban areas. It will strain economic and social systems and put unprecedented pressure on the allocation of scarce resources. Today an estimated one billion people live in slums and two billion people lack access to electrical power. Often this is a result of inadequate planning, poor policies, market failures, and gaps in government capacity. Though public institutions and governments recognize the universal need for adequate housing, in many cases it is local businesses that can most effectively provide solutions.
Households with modest means need safe, suitable housing that they can afford. When housing is affordable, families are able to meet other basic needs such as providing nutritious food, receiving necessary medical care, and providing for the education of their children. Affordable housing therefore can have profound effects on childhood development and school performance.
And these benefits of affordable housing are extended beyond the occupants of the housing to the community at large. Affordable housing allows for economic development of communities by allowing employers to find local workers, and by increasing local economies families are able to buy goods in the local community.
Affordable housing is therefore the backbone of a healthy community. As urbanization in both developing and developed countries continues to accelerate, the challenges of safe, decent, and affordable housing will likewise grow.
Lafarge, through its 2013 program 'Sustainable Ambitions 2020 ', has set an objective to participate in projects to allow two million people access to affordable housing by 2020. The company has found that one successful mechanism to implement affordable housing is through the use of a microfinance program. In 2013, Lafarge was able to participate in 2,000 such microfinance projects and now seeks to bring this type of program to a much greater scale through the leveraging of new resources. The target is a five-fold increase to what was achieved in 2013 by the end of 2015.

Partnership Opportunities

SEEKING:
Lafarge would like to mobilize foundations and funds to support the deployment of its projects by: 1) Communicating Lafarge's microfinance package offer to the microfinance institutions which they may have already invested in; 2) Providing loans to microfinance organizations which will directly fund the projects; 3) Considering investing in microfinance institutions identified by Lafarge and which seek capital; 4) Supporting Lafarge's efforts to train microfinance institutions on housing finance, through the roll out of the Lafarge housing microfinance academy 5) Conducting surveys of slum areas to understand construction habits and local needs. CGI partners could contribute by helping to identify local requirements and candidates for the program and by identifying microfinance institutions, training them to integrating a housing product, and funding them when applicable.

OFFERING:
Lafarge commits to 1) Implement projects in ten countries with dedicated technical assistance teams; 2) Partner with microfinance banks and their funders in these countries; 3) Share best practices in implementing housing microfinance partners with interested partners; 4) Partner with foundations and NGOs to conduct surveys of slums.

Progress Reports

July 2015

At the end of June 2015, Lafarge achieved its commitment of providing technical assistance to more than 10,000 borrowers of microloans for home improvement. Through the partnerships set up in 10 countries, more than 1800 homes are now improved, extended, andfinished every month.